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CHAPTER 7

CUSTOMER FOCUS
AND
SATISFACATION
Quote


Quality begins and ends with the
customer.



Joel E. Ross
PROCESS Vs. CUSTOMER
Customer complaints are analogous to process variation.
Both are understandable and must be addressed. In both
cases, the optimum output must be compared against an
objective, a standard, or a benchmark. Both are integral
parts of the quality improvement process. The integration of
the customer and the process is shown conceptually in
figure.

From the companys point of view. Customer satisfaction is
the result of a three part system:

1. Company processes (operations)
2. Company employees who deliver the product, and service
that is consistent with
3. Customer expectations

Integration of Customer and Process
Customer Focus Process Focus
Listen to the
Voice of the customer
Listen to the
Voice of the process
Predict customer behavior
(purchase decision, preferences)
Predict process behavior
(outcomes, variations)
Determine customer
Quality expectations
Determine optimum
Process outcomes
Propose and test Process improvements to meet
Customer expectations
Thus the effectiveness of the three-part system
is a function of how well these three factors are
integrated.
This concept is shown in next slide Figure. The
overlap (shaded area) represents the extent to which
customer satisfaction is achieved. The objective is to
make this area as large as possible and ultimately to
make all three circles converge into an integrated
system.
The extent to which this condition is achieved
depends on the effectiveness of:
1. The process
2. Employees and
3. Determination of what constitutes satisfaction.
Customer Satisfaction:
Three Part System
Customer Expectation Human Resource Management
Company Operations
(Process)
Customer Satisfaction
Internal Customer Conflicts
Internal customer are also important in a TQM program.
These are the people, the activities, and the functions within
the company that are the customers of other people,
activities or functions.
Hence, manufacturing is the customer of design, and
several departments may be customers of data processing.
Conflicts frequently arises between the needs of internal
and external customers.
In many cases, process are designed to meet the needs of
internal customers.
Defining Quality
The shortfall regarding product quality is that the
services connected with it are so frequently
overlooked.
Good packaging, timely and accurate shipping
and the ability to meet deadlines matter as much
as the quality of the product itself.
Customer defines quality in term of total
experience with the company.
Many companies approach customer satisfaction
in a narrow way by confining quality
considerations to the product alone.

Break Points
The need to improve customer satisfaction in measurable
amounts is well known. But what are the measurement and how
much improvement is needed?
If a customer is willing to stand in line for 2 minutes but finds 5
minutes unacceptable, anything between is merely satisfactory.
Zero to one minute is outstanding.
On time delivery below 90percent may be judged by customers
as unacceptable, while over 98% is considered outstanding.
Improvement program should be geared toward reaching either
a two-minute or five-minute range for standing in line and either
90 or 98% for delivery times.
Theses are the market breakpoints, where improving
performance will change customer behavior, resulting in higher
prices or sales volume.
Forget the improvement program that targets one minute
waiting in line or the delivery program that targets between 90
and 80 percent.
The Driver of Customer Satisfaction
The issue in building customer satisfaction is to acquire
satisfied customers, know when you have them, and
keep them.
The obvious way to determine what makes customer
satisfied is simply to ask them. Before or concurrently
with a customer survey, an audit of the companys TQM
infrastructure needs to be made.
IBM is one company that has identified the key
excellence indicators for customer satisfaction.
Key Excellence Indicators for Customer
Satisfaction
Service standards derived from customer requirements
Understanding customer requirements
Thoroughness/ objectivity
Customer types
Product/ service features
Front-line empowerment (resolution)
Strategic infrastructure support for front-line employees
Attention to hiring, training, attitude, morale for front-line
employees
High levels of satisfaction-customer awards
Proactive customer service systems
Key Excellence Indicators for Customer
Satisfaction
Proactive management of relationships with customer
Use of all listening posts
Surveys
Product/ service follow-ups
Complaints
Turnover of customers
Employees
Quality requirements of market segments
Surveys go beyond current customers
Commitment to customer (trust/ confidence/ making good
on word)
Measurement of Customer Satisfaction
There are two basic steps in a measurement system.

1. Develop key indicator that drive costumer satisfaction.
2. Collect data regarding the perception of quality receive by
costumer.
Key indicator of costumer satisfaction or what the
company has chosen to represent quality in its product
and services and the way in which these are delivered.
The building blocks that the system is designed to track
are;
Expectation of the costumer
Company perception of costumer expectation


The Role of Marketing and Sales
Marketing and sales are the functions charged with gathering
customer input, but in many firms the people in these
functions are unfamiliar with quality improvement. Short
comings in marketing as identified in critics include:

Partnering arrangements with dealers and distribution
channels.
Focusing on the physical characteristics of product and
overlooking the related services.
Losing a sense of customer price sensitivity.
Not measuring or certifying suppliers such as advertisers.
Failing to perform cost/benefits analyses on promotion costs.
Losing markets to generics and house brands.
Customer Retention and Profitability
The system for improving customer retention and profit is
illustrated in next slide. The drivers are employee
satisfaction and employee retention. The system
components are;
Internal service quality: which establishes and reinforces a
climate and organization culture directed toward quality
Employee retention: This is achieved through good HRM
practices and OD methods such as teams, jobs
development and empowerment. Employee retention
depends on employee satisfaction, which in turn can be
related to external service and customer satisfaction.
External service quality: This is delivered through the
organizations quality infrastructure.
Customer satisfaction and follow up: In order to reduce
customer defections and improve retention.
Profitability and Customer Retention
Internal
Service quality
Employee
retention
External
Service quality
Customer
satisfaction
Customer
Retention
Profit
Employee
Satisfaction
System
Driver
Buyer-Supplier Relationship
Several guidelines will help both the supplier and customer
benefit from a long-term partnering relationship:

Implementation of TQM by both supplier and customer:
Many customers are requiring suppliers to start practicing
the basic principles of TQM. Some have even required the
supplier to apply for the Baldrige award. This joint effort
provides a common language and builds confidence
between both parties.

Long-term commitment to TQM and to the partnering
relationship between the parties:
This means a lifecycle relationship that caries partnering
through life cycle of the product, from market research and
design through production and service.
Reduction in the supplier base:
One or more automobile companies have reduced the
number of supplier from thousands to hundreds. Why
have ten suppliers for a part when the top two will do
better job and avoid problems?

Get suppliers involved in the early stages of
research, development and design:
Such involvement generates additional ideas for cost and
quality improvement and prevents problems and later
stage of the product life cycle.

Benchmarking:
Both customer and supplier can seek out and agree on
the best-in-class product and processes.